Are you in line for a credit card refund? More customers may be compensated for vast sums spent insuring their debts

By Richard Dyson

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The payment protection insurance scandal, which has already cost banks £12billion and hit millions of consumers, is taking a new twist as borrowers wake up to  the vast sums that they have spent supposedly insuring their credit card debts.

So far the PPI scandal has been about policies sold alongside personal loans and involving a single payment. The bulk of compensation paid so far, which last week reached a staggering £8.9billion, relates to this single-premium insurance.

But borrowers are becoming aware of a more complex and toxic form of payment insurance sold alongside millions of credit cards.

Refunds: The PPI scandal is taking a new twist as borrowers wake up to the vast sums that they have spent supposedly insuring their credit card debts

Refunds: The PPI scandal is taking a new twist as borrowers wake up to the vast sums that they have spent supposedly insuring their credit card debts

Under orders from the City regulator, Barclays, the country’s biggest credit card provider, is in the process of writing to 750,000 customers, telling them they may have grounds for compensation. All the letters will be sent by June.

In theory, credit card payment insurance was similar to the single-premium type, in that if borrowers lost their incomes it was supposed to kick in and meet their monthly card bills.

In practice, it was extremely complex. The policies typically charged a monthly 79p or 89p per £100 balance on the card. But how the balance was measured, or whether the premium was included in the minimum monthly repayment, were just two of many factors adding to the confusion.

Interest on the insurance premiums at the card’s usual rate (typically 20 per cent APR) could rapidly mount. The other problem was that the insurance, unlike the sort sold with a loan, did not have an end-date. Many cardholders may have unwittingly paid it for years, and continue to do so.

Mark Davies, a former legal director at insurer Zurich but now a consultant to a range of finance firms, believes there has a been a ‘widespread failure to understand the toxicity of payment insurance as applied to credit cards’.

‘More of this type of payment insurance was sold because borrowers thought it was cheap,’ he says. ‘Few understood the cumulative costs when interest is applied. Many cardholders don’t know they’ve got it, so they don’t ever claim – and nor do they cancel.’

There are no figures for the number of policies in force. Davies estimates three million, down from the last published figure of 6.5million in 2007. Nor is there any concrete data on how much of the compensation paid so far relates to cards rather than loans. The most complained-about banks, Lloyds and Barclays, do not divulge the split between loans and cards.

Barclaycard, which has ten million customers, will not say how many payment policies it sold alongside its cards, or how many remain in force.

Chief executive Valerie Soranno Keating refused to speak to Financial Mail, and no other senior executive was made available.

Many questions relating to Barclaycard’s insurance remain unanswered. Requests for its leaflets explaining to customers how the insurance was charged were also refused. But Barclays bosses have been more forthcoming with shareholders, who last month were warned to brace themselves for another £1billion in compensation costs, on top of the £1.6billion already paid.

Persistence pays: 'I gained a £4,900 refund from Santander for two mis-sold PPI policies'  

Persistence pays is the message of  Bob Jenkins, who has just received £4,898 from Santander to compensate for two PPI policies wrongly sold by the bank in 1999 and 2004 alongside two mortgages.

Bob, 64, who enjoyed a long and successful career running print businesses, started his complaint last August.

When he took out the mortgages he had been told, wrongly, he wouldn’t get the loans unless he took out the insurance. This was a classic ‘mis-sale’.

Bulldog spirit: Bob Jenkins won a long battle with Santander

Bulldog spirit: Bob Jenkins won a long battle with Santander

But Bob, who lives in Wolverhampton, soon hit an obstacle in his claim for redress. He knew for certain two policies had been wrongly sold to him, but Santander could find evidence of only one, for which it offered to pay £870 compensation. ‘The onus was put on me to find the other because the bank said there was no trace,’ he says.

So Bob switched his campaign to a ‘war footing’, which consisted of sending Santander bank records showing the payments and then ringing their call centre every day for two months, demanding progress reports.

He logged each call, including the name of the staff, building a formidable dossier.
When the bank eventually agreed that two policies were involved and upped its offer to £4,898.05,

Bob insisted on an apology as well – which he received. ‘We would like to apologise for the service you have received,’ the bank said in a letter, and gave him an extra £200 for his trouble.

Bob says: ‘Consumers need to find their bulldog spirit. Of course, the banks put up hurdle after hurdle – but  my message to  others is don’t give  up – give ’em hell.’

Barclays’ bosses said they expected one third of the recipients of the 750,000 letters to make a claim, and that half of these claims would result in payouts averaging £2,000. The bank told Financial Mail yesterday: ‘Barclaycard has recently written to customers who may have an eligible claim and we would advise customers to get in touch with us so that we can discuss their case.’

 

The comments below have not been moderated.

mortgage protection insurance. £billion lie unclaimed. popular in the 1970 & q 1980's to protect the lender against borrow default. Halifax Building Society added £1000's onto unwitting borrow's. This is barred due to statutary barring of actions upto 6 years, or is it? If the courts recognise you were ignorant of your rights until now then maybe you have a right to reclaim these costs added without choice for the lender. also compulsery lender insurance.

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People are far to thick to have money. Leave them all poor.

Click to rate     Rating   3

as far as I know I never would have agreed to any such thing as PPI, I refuse everything like this, at least since the early 1990s anyway when I had it on a modest bank loan because the then manager said it was a condition of the loan being granted (to pay for a training course, not luxuries btw). But now this makes me feel sort of uneasy, like maybe I missed something? Thanks finance ppl for that thought while I am using my expensive overdraft due to an unexpected bill!

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Far to many false claims that most knew they had it. To many dishonest people taking advantage.

Click to rate     Rating   8

Banks have already been giving credit card ppi back for agesss and it's not just single policies for loans it can be monthly too. I should know I work within the financial industry.

Click to rate     Rating   1

Oh no.....not more potential leech company's ringing us all to tell us we are entitled to more money....but they don't know who I am??????

Click to rate     Rating   9

"- female , Manchester, 17/3/2013 08:07 - " - I couldn't agree more, how could a borrower not know? I was mis-sold a PPI (or an equivilent product) 24 years ago when I took out my first loan. I knew the Natwest bank were pulling a fast one but I wanted the cash, had no collateral and it was a first loan so I went for it. I cancelled it after a month. Sometimes people have to accept responsibility for their own action but these days they rely on these stupid state regulations. What about all the poor saps who lost their life savings through the non-~ISA Key Data debacle. They didn't get this sort of state led help. On a positive note on behalf on PPI - it's the only industry creating jobs and raising revenue in the UK these days - oh, that and loan shark businesses - what a sad, sorry, state of affairs! UKIP for me too.

Click to rate     Rating   4

When all the publicity about mis-sold PPI started, I noticed that Halifax One had charged me 48p that month so I rang them and cancelled it.

Click to rate     Rating   2

I was told by Halifax my PPI claim for Marbles card was rejected as I had ticked original form for PPI. Absolutely no recollection of this as I never had PPI on any other cards. They now inform me they have destroyed original form and cannot present it to me. I have asked, as entitled for documented evidence of its destruction and am still awaiting a reply from HSBC who were apparently responsible party at the time. They are simply using delaying tactics but I will persist with my rightful claim all the way

Click to rate     Rating   5

@Shuffee is you account still open? When it's closed you need your credit agreement back it is a promissory note (bill of exchange act 1882). This is your IOU and is treated as cash once you sign it. If the bank can't produce the original inked one you signed then they have possibly sold it which means you don't own then anything. If it was scanned and the paper one shredded then they hold an "empn". This by right is yours and they must send it back to you and delete it from their records once your account is cleared.

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